Investment advice for small investors

I have been fielding a number of questions lately that go something like this: "I have just retired/I am just starting out and need help with managing my money, but it doesn't seem like most brokers or advisors want to work with smaller clients. What should I do?"

This is a vexing issue, because many people with modest nest eggs do not have the time, energy, desire or acumen to manage their investments. Unfortunately, traditional brokers and advisors have essentially priced these folks out of the market by jacking up the fees for smaller portfolios (assets under $250,000) to 2 percent or by charging fat commissions for expensive mutual funds or insurance products.

The good news is that increased competition, combined with new technology, has created options for smaller investors who are seeking guidance. The basic model is that a company will create a simple financial plan and will also provide portfolio allocation recommendations for a flat fee based on the amount of money you have invested. Mutual fund and discount brokerage firms Vanguard, Fidelity Charles Schwab, TD Ameritrade and E*Trade have different variations on the theme, with fees ranging from 0.50 percent to 1 percent and each institution requires an investment minimum.

In addition to these options, a great development for smaller investors is the advent of web-based alternatives, which guide you through a risk assessment process, recommend a portfolio and then either provide you with a nudge to rebalance (for do it yourselfers) or an automatic rebalancing tool that the company will employ on your behalf.

Wealthfront.com targets those who are comfortable conducting business on line, without the help of a human being (unless it's a tech support question). Wealthfront does not charge an advisory fee on the first $10,000 of assets under management, though dies require a minimum of $5,000. On amounts over $10,000, there is a monthly advisory fee based on an annual fee rate of 0.25 percent. Investors also must pay for the cost of Exchange-Traded Funds (ETFs), which averages 0.17 percent.

Another online service, Betterment.com, offers a sliding scale fee structure. There is no required minimum, but users must commit to investing at least $100 monthly. For those with less than $10,000, the cost is 0.35 percent; for $10,000 - $100,000, the fee is 0.25 percent; and the fee drops to 0.15 percent for accounts with more than $100,000 and you can get advice too. Betterment does not charge for trades or transactions.

MarketRiders charges users either a monthly subscription fee of $14.95 or a yearly fee of $149.95 to use their service, in addition to the fees associated with buying and owning ETFs and index funds and a separate charge for rebalancing. MarketRiders emails a monthly statement and rebalancing alerts whenever an alert is triggered.

The MarketRiders founders launched an additional site called Rebalance IRA, which as the name implies, is focused on those with retirement assets. But the new site adds a bit more hand holding to the MarketRiders concept, because users work with a Rebalance advisor. In exchange for the personal guidance, the fees are higher: 0.50 percent per year based upon total assets under management per account, with a minimum fee of $500 per year per account.

Rebalance IRA recommends that you have at least $75,000 in your account within the next year to get started. There is also a one-time set-up charge of $250 for each account, the ETF fund fees and trading costs, which average between $50 and $70 each time they rebalance your account. One more caveat: you must hold assets at either Charles Schwab or Fidelity.

If you are old school and prefer meeting with a human being who can provide you with customized one-on-one advice, it's going to cost you -- probably about $300 an hour, with some sort of minimum. The best bet is to find a professional who has earned the CFPÂ® certification or is a CPA Personal Financial Specialist. You can ask for referrals from friends or colleagues or use the search tools offered by the Financial Planning Association (fpanet.org) and the National Association of Personal Financial Advisors (Napfa.org).

For the small investor who seeks investment advice, there are options out there, but they require a bit of front-end work. Still, the alternative is going it alone, which for many, is not worth it.

(Jill Schlesinger, CFP, is the Emmy-nominated CBS News Business Analyst. A former options trader and CIO of an investment advisory firm, Jill covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." She welcomes comments and questions at askjill@moneywatch.com. Check her website at http://www.jillonmoney.com)